Fima throws medical aid funds off balance
A provision in the Financial Institutions and Markets Act (Fima), which places a ban on the outsourcing of the core functions of medical aid funds and fund administrators in Namibia, poses a serious threat to the industry.
The ban on outsourcing applies to the assessment and determination of claims, payment of health-related expenses on behalf of members, design of benefits, executive management functions, and the handling of contributions.
The result could mean that administrators may no longer be able to sustain their operations in a viable manner and may be forced to exit the market.
Methealth Namibia Administrators, Prosperity Health, Medscheme Namibia Administrators, Clinico Health Group, and Paramount Health warn in a letter to the Namibia Financial Institutions Supervisory Authority (Namfisa) that such functions have historically been the backbone of fund administrators’ core business operations. To prohibit these core income-generating functions poses a direct threat to the financial viability of the industry in Namibia, the group emphasised.
In the letter, which was also addressed to the minister of finance, reference is made to the investment of millions in advanced technologies and comprehensive staff training to develop systems that efficiently manage the complex life cycle of medical aid claims. This is also the primary source of income for administrators.
“This loss of income will make it impossible for many administrators to cover their operational expenses and will ultimately force them out of the market.”
For smaller, employer-based funds without the financial and technical resources to handle claims internally, the Standard will make it unsustainable.
“Outsourcing has been an important driver of employment and has made the administration of medical aid funds efficient and viable, especially for smaller funds,” the letter states.
It will also most likely lead to significant job losses, as administrators will be prevented from performing their work, which for years has sustained employment within the industry.
By dividing the distribution of core processes among different entities, operational risks are expected to increase, efficiency will decrease, and unnecessary complexities will be created in the management of claims and benefit payments.
Should the provision be implemented, members of medical aid funds - particularly those dependent on employer-sponsored coverage - may face possible prepayments for medical services that many households will struggle to afford.
The letter warns that the provison not only undermines efficiency through duplication of systems, controls, and resources between the fund and its appointed administrators, but also creates delays, errors, and inconsistencies in the application of fund rules. It also weakens administrators’ ability to deploy specialist systems, personnel, and expertise to manage claim risks. Fragmenting the administration of funds by dividing key processes among multiple service providers also creates significant risks, especially regarding the security and confidentiality of personal health data, they argued.
“This approach exposes funds, administrators, and members to unnecessary and preventable risks, with potentially serious consequences for privacy, trust, and the overall integrity of the healthcare system.”
The letter stresses that the provision is not aligned with regional or international regulatory frameworks, where administrative outsourcing to regulated administrators is permitted under robust risk-based controls.
“We believe the [provision] disrupts the constitutional and developmental objective of ensuring access to healthcare, thereby sacrificing the well-being of citizens.”
Fima was promulgated on 1 October 2021, but a date for its official implementation has not yet been announced. Since then, Namfisa has reviewed and issued several Fima standards and regulations. The law is designed to strengthen oversight of financial institutions, protect clients, and promote transparency.
— [email protected]
The ban on outsourcing applies to the assessment and determination of claims, payment of health-related expenses on behalf of members, design of benefits, executive management functions, and the handling of contributions.
The result could mean that administrators may no longer be able to sustain their operations in a viable manner and may be forced to exit the market.
Methealth Namibia Administrators, Prosperity Health, Medscheme Namibia Administrators, Clinico Health Group, and Paramount Health warn in a letter to the Namibia Financial Institutions Supervisory Authority (Namfisa) that such functions have historically been the backbone of fund administrators’ core business operations. To prohibit these core income-generating functions poses a direct threat to the financial viability of the industry in Namibia, the group emphasised.
In the letter, which was also addressed to the minister of finance, reference is made to the investment of millions in advanced technologies and comprehensive staff training to develop systems that efficiently manage the complex life cycle of medical aid claims. This is also the primary source of income for administrators.
“This loss of income will make it impossible for many administrators to cover their operational expenses and will ultimately force them out of the market.”
For smaller, employer-based funds without the financial and technical resources to handle claims internally, the Standard will make it unsustainable.
“Outsourcing has been an important driver of employment and has made the administration of medical aid funds efficient and viable, especially for smaller funds,” the letter states.
It will also most likely lead to significant job losses, as administrators will be prevented from performing their work, which for years has sustained employment within the industry.
By dividing the distribution of core processes among different entities, operational risks are expected to increase, efficiency will decrease, and unnecessary complexities will be created in the management of claims and benefit payments.
Should the provision be implemented, members of medical aid funds - particularly those dependent on employer-sponsored coverage - may face possible prepayments for medical services that many households will struggle to afford.
The letter warns that the provison not only undermines efficiency through duplication of systems, controls, and resources between the fund and its appointed administrators, but also creates delays, errors, and inconsistencies in the application of fund rules. It also weakens administrators’ ability to deploy specialist systems, personnel, and expertise to manage claim risks. Fragmenting the administration of funds by dividing key processes among multiple service providers also creates significant risks, especially regarding the security and confidentiality of personal health data, they argued.
“This approach exposes funds, administrators, and members to unnecessary and preventable risks, with potentially serious consequences for privacy, trust, and the overall integrity of the healthcare system.”
The letter stresses that the provision is not aligned with regional or international regulatory frameworks, where administrative outsourcing to regulated administrators is permitted under robust risk-based controls.
“We believe the [provision] disrupts the constitutional and developmental objective of ensuring access to healthcare, thereby sacrificing the well-being of citizens.”
Fima was promulgated on 1 October 2021, but a date for its official implementation has not yet been announced. Since then, Namfisa has reviewed and issued several Fima standards and regulations. The law is designed to strengthen oversight of financial institutions, protect clients, and promote transparency.
— [email protected]
Comments
Namibian Sun
No comments have been left on this article